tinuance of post offices, but also the distribution of blanks, wrapping paper, and twine to all post offices; the supervision of pay of clerks in post offices; of allowances for furniture of post offices; of extra allowances to postmasters under the acts of Congress; of the appointment and pay of special agents, route agents, local agents, and blank agents; and of baggage-masters in charge of mails; of the foreign mail transportation and foreign correspondence, together with some other miscellaneous duties.

NUMBER OF POST OFFICES.

The whole number of post offices remaining established on the 30th June, 1862, including the suspended offices in the insurrectionary States, was 28,875, showing an increase, as compared with the preceding year, of 289. Of these, 426 have the rank of presidential appointment, and 28,449 are filled by appointments of the Postmaster General. Their classification by States is shown in the appendix, (No. 1.)

CHANGES IN 1862.

The whole number of cases acted upon during the last fiscal year is 7,785; and the number of postmasters changed, from all causes, during the year, is 7.102. The number of resignations has been un usually large, owing to the patriotic disposition of these officers to engage personally in the military service of the country. Further information touching the classification and location of post offices, and the changes made in different States and Territories, will be found in the tables (Nos. 2, 3, 4,) appended to this report.

POSTAL AGENCIES.

At the close of the preceding fiscal year, 1861, the number of special agents employed regularly in the service was 16, whose salaries amounted to $26,500. At the close of the fiscal year 1862 the number was 15, reducing the amount of salaries to $24,900. I have since discontinued another agency, reducing the number to 14. But I also employed, under the late act of Congress, three temporary agents, at a salary of $1,200 each, only two of whom continue in the service. They are appointed from time to time for short periods, and to meet special exigencies of the service.

My last annual report stated the number of route agents in 1861 at 392. The number on the 30th June, 1862, was 377. That branch of expenditure has been thoroughly revised, resulting in a reduction from the preceding year of $22, 026. The number of baggage-masters appointed in charge of mails has been increased from 50 to 74; but owing to a revision and equalization of their pay, the total expense has, at the same time, been reduced from $6, 180 to $4,815.

The total reduction in rates of pay of the several classes of mail agencies, as compared with the rates of the previous year, appears

to be $25,663. The details of these changes appear in an exhibit appended to this report, (No. 5.)

FOREIGN MAILS.

The civil troubles agitating this country have caused a large reduction in the amount of foreign postages accruing during the last fiscal

The table (No. 6) appended to this report shows the details of the service between this and the several foreign postal departments. The total reduction in receipts from foreign postages is $217,940 88.

PAYMENT OF FOREIGN BALANCES.

Under existing arrangements the payment of balances is made at the cost of the remitting country. A more just arrangement would require the department receiving payment to pay the exchange, if any, as a charge of remittance, the collecting country standing rather as an agent collecting the balance to be remitted at the cost of, and in the manner directed by, the beneficiary. I have directed a correspondence upon this subject for the purpose of establishing that principle of adjustment. Under the present system this department suffers a net deduction from its own domestic revenues to defray the cost of its remittances to foreign departments of the balances due to them. I trust a more equitable arrangement may be established by a mutual effort for a just principle of settlement.

It is also apparent that the prevailing arrangement operates to the detriment of the prepaying country, wherever postmasters and post office expenses are paid by commissions upon the amount collected; for our estimated commission of 40 per cent. goes to cover expenses in this country, while we remit the entire amount to the creditor country, which, so far as it has the same system, makes the entire collection without any of the expense it would incur if the collection was made at home. It thus renders the post payment of postage of pecuniary advantage to each country having the system of defraying expenses by commissions. In effect, it costs this department (approximately) $40,000, besides the premium for exchange, to collect and remit every $100,000 of balances due to foreign countries. To correct the inequality of this system, I am ready to adopt the rule of absolute prepayment of all foreign postages, where such prepayment is practicable; or, in the alternative, to agree upon a precise abatement of a percentage upon the ascertained balances, as the estimated equivalent of the cost of collection. I am also willing to adopt the general rule of remitting balances under direction and at the cost of the creditor department.

STATISTICS OF THE FOREIGN SERVICE.

The total cost of the United States transatlantic mail steamship service during the year was $319, 393 94. Of this amount $33,509 704 was earned by American steamers, performing five outward and seven inward passages, for the sea and United States inland postages; and

235,881 23 by foreign steamers, performing 138 outward and 135 inward passages, for the sea postage only.

The aggregate amount of postage on the mails exchanged with the British North American provinces during the year, was $177,753 51: of which $95,123 33 was collected in the British provinces, and $82,630 18 in the United States. Excess in favor of the British provinces, $12,493 15.

The United States postages on the West India mails amounted during the year to $50,956 60; of which sum $41,546 28 have been paid to the owners of the steamers performing the service to and from Havana and other West India ports. The mails have also been conveyed by steamships to Key West and New Orleans for the postages, as compensation for the service; four outward and two inward trips having been performed between New York and New Orleans from May 28 to June 30, 1862, at a cost of $1,304 21; and one inward and three outward passages between New York and Key West, from May 31 to June 30, 1862, at a cost of $942 40.

The mails to and from Mexico having been forwarded and received by way of Havana, the United States postages thereon are embraced in the amounts reported for the West India mails.

The correspondence between the United States and Central and South America, including also Acapulco, Mexico, has been regularly conveyed by the California line of steamers via Panama, under an ar rangement made with Cornelius Vanderbilt, esq., he receiving the United States postages thereon as compensation for the service. The cost of this service amounted during the year to the sum of $17,912 91.

POSTAL TREATIES.

Postal conventions have been concluded with the governments of Mexico and Guatemala, respectively, copies of which are annexed, (Nos. 7 and 8.)

MEXICO.

The convention with Mexico was negotiated by our minister to that country, approved by the Senate, and finally proclaimed by the President. Its provisions are very simple, establishing a sea rate of postage between the two countries, both for letters and printed matter, to be collected and retained by the country despatching the mails, in addition to its regular domestic rates, and the country receiving the mails is to levy and collect its regular domestic rates on delivery, thus avoiding any postage accounts between the respective post office departments. It makes no provision, however, for estab lishing and maintaining a line of packets for the regular transpor tation of the mails between the two countries.

GUATEMALA.

The convention with Guatemala was negotiated and concluded between this department and the postal authorities of that repub

lic, and came into operation on the 1st of September last. It also dispenses with accounts between the respective post office departments, each country being required to levy and collect its own postage only at the rates established by the convention, embracing therein the sea rate. Provision is made for the regular conveyance of mails by way of the Isthmus of Panama, the United States undertaking the cost of service between New York and Aspinwall, and San Francisco and Panama, while Guatemala undertakes the isthmus and remaining sea transportation.

COSTA RICA.

The postal convention recently concluded with Costa Rica and approved by the Senate has not been ratified by the Costa Rican government, for the reason that it was found impossible to harmonize its provisions with a recent postal law enacted by the congress of that republic.

GREAT BRITAIN.

Additional articles to the United States and British postal convention have been agreed upon, establishing an exchange of mails between the offices of Boston and Southampton by means of the United States mail packets plying between New York and Southampton. A copy thereof is annexed, (No. 9.)

GERMAN POSTAL UNION.

Negotiations are pending for a new postal convention with Prussia, embracing the states composing the German Austrian Postal Union, which, if concluded, will reduce the existing international postage charges upon letters in the closed mails from 30 to 22 cents the single rate, and admit into the mails not only newspapers but all other kinds of printed matter at moderate postal charges. It is also proposed to change the present system of accounting upon the correspondence exchanged in the closed mails, so as to account by weight of the letters, and in bulk, instead of by the single rate, and thus simplify and expedite the distribution and delivery of mails at the receiving offices. This important proposed reduction of postage between the United States and the German Postal Union will result from a reduced Atlantic sea rate upon the closed mails exchanged with Prussia, via the United Kingdom, of 12d. (24 cents) per ounce for letters, and 5d. (10 cents) per pound for printed papers, whether conveyed by United States or British mail packets; with a further agreement with the British post office to reduce the charges for the territorial conveyance of all closed mails sent by the United States through the United Kingdom, or by the United Kingdom through the United States, to an uniform rate of 4d. (8 cents) per ounce for letters, and 5d. (10 cents) per pound for printed papers.

BRITISH RATES.

The expectation offered in my last report of a reduction of the letter rate of postage between this country and the United Kingdom from 24 to 12 cents, I regret to state, has not been realized; my formal acceptance of this reduced rate for international letters proposed by the British post office in February, 1857, having failed now to receive the concurrence of that office. The British department states in reply that it is not disposed to agree upon any reduction of the international letter rate, until the existing contract entered into by it for the North American mail service terminates; and this contract has about six years to run. The non-concurrence of the British office in my acceptance of its proposition was not anticipated, and is placed upon such grounds as to leave no opening at present for the further prosecution of the negotiations.

INTERNATIONAL POSTAL CONFERENCE.

Our international mail system is extremely loose and defective. There is no common standard weight for the single rate. There is no common rate for the sea transit, or for overland transit. The inland transit rate upon domestic correspondence furnishes no rule for overland transit of foreign correspondence.

Rates upon closed mails are not uniform by distance, or by other common rule, and they vary greatly according to the route of carriage. The whole foreign system, as now established, is too complex to be readily understood by postmasters, and many mistakes and unfortu nate delays arise from its complexity. I had little hope of remedying these evils except by a general congress of postal representatives, practically acquainted with their respective systems, and predisposed to facilitate the international, social, and commercial correspondence, by which national prosperity is so much affected.

Accordingly, I opened a correspondence through the State Department on the 4th of August last; and several replies have been received, all of which are favorable, and consent to the project. If the representatives to the proposed congress shall engage in its objects, recog nizing the fact that postal arrangements, as compared with the great interests of commerce and of national intercourse, are auxiliaries and not principals, I shall hope for the best results. Should the other countries which have been invited to co-operate approve of the object of the conference, many desirable improvements may be introduced which it will be difficult, if not impossible, to secure without concert of action. The subjects to be submitted by this department for the consideration and action of the proposed conference are stated in my letter of the 4th of August last to the Secretary of State, a copy of which is appended to this report, (No. 10.)